Mortgage insurance vs. life insurance: what to choose and in which cases?
Although there is no legal obligation to take out an insurance contract when borrowing to buy property, it is essential to take out insurance in order to protect yourself in the event of a hard blow. Mortgage insurance vs life insurance: which protection to choose and in which case?
Bank mortgage insurance: debt insurance
When studied closely, the contracts offered by banking institutions have few advantages:
they are not transferable in the event of a change of lender when renewing the mortgage or buying back another asset. Premiums are increasing due to the increase in the borrower's age and the possible deterioration in his health.
they only cover the balance of the mortgage amount which decreases over the months, and does not cover any other costs.
the bank is the beneficiary of the contract and receives the amount of insurance in the event of death
they repay the loan balance only for the fraction of the principal remaining owed by the borrower, the co-borrower retaining his portion of the loan, which may force him to sell the property.
Mortgage contracts offered by banks remain a priori attractive option for:
people in a hurry who do not want to waste time in the process and want protection in the event of serious illness, accident, death or disability. Indeed, as there is no on-demand pricing, taking out insurance at the bank is indeed a simple and instantaneous process.
borrowers in poor health thinking they are paying less. They are unaware that their insurability will be calculated at the time of the claim and that the insurer may refuse to pay the sum insured.
Mortgage insurance from the broker
By taking out the mortgage insurance contract through a broker, you can benefit from the same protections, death, disability, accidents and serious illnesses and for the same price as at the bank, but with notable advantages:
insurability is determined before subscription, which avoids unpleasant surprises in the event of a hard blow
the insured capital does not decrease with the payments, allowing the beneficiary to distribute the premium according to his priorities and as he sees fit
the borrower chooses the beneficiary, who abstracts from the problems associated with the loan splitting
the contract is transferable in the event of a change of lender or the purchase of a new property
the individually contracted policy offers a conversion clause into life insurance that debt insurance does not include.
This mortgage insurance offers ideal protection for, for example, a borrower entering the labor market.
Life insurance
The life insurance policy covers death only and if the borrower is to protect themselves against the risk of serious illness or disability, they need to take out other policies.
On the other hand, taking out a life insurance contract has the same advantages as the broker's mortgage loan with the addition of:
the possibility of insuring for an amount greater than the mortgage, which makes it possible to include for example
other loans such as a student loan or a personal loan for the purchase of a car
a sum to replace the income of the deceased
savings for children's education
the combination of protection in the event of death and tax-sheltered savings ideal for estate preparation for universal life insurance.
Life insurance is particularly suitable for couples, especially with children, and people preparing for retirement and succession.
Wisdom dictates that you provide appropriate protection in the event of a hard blow. While the main objective of mortgage insurance from banks is to guarantee payment of the financial institution's debt, those offered by brokers make it possible to cover the borrower and his family more appropriately. Life insurance goes even further in protecting the beneficiary if the subscribed capital exceeds the mortgage or allows savings to be invested. Note that it is necessary to take out other policies to insure the risks of accident, serious illness or disability.
Post a Comment